Relative size hypothesis

Historically, the best-known alternative to the "apparent distance" theory has been a "relative size" theory. This states that the perceived size of an object depends not only on its retinal size, but also on the size of objects in its immediate visual environment. In the case of the Moon illusion, objects in the vicinity of the horizon moon (that is, objects on or near the horizon) exhibit a fine detail that makes the Moon appear larger, while the zenith moon is surrounded by large expanses of empty sky that make it appear smaller.[10]
The effect is illustrated by the classic Ebbinghaus illusion shown at the right. The lower central circle surrounded by small circles might represent the horizon moon accompanied by objects of smaller visual extent, while the upper central circle represents the zenith moon surrounded by expanses of sky of larger visual extent. Although both central circles are actually the same size, many people think the lower one looks larger.
The Ebbinghaus illusion or Titchener circles is an optical illusion of relative size perception. Named for its discoverer, the German psychologist Hermann Ebbinghaus (1850–1909), the illusion was popularized in the English-speaking world by Edward B. Titchener in a 1901 textbook of experimental psychology, hence its alternative name "Titchener circles".[1] In the best-known version of the illusion, two circles of identical size are placed near to each other and one is surrounded by large circles while the other is surrounded by small circles. As a result of the juxtaposition of circles, the central circle surrounded by large circles appears smaller than the central circle surrounded by small circles.
Recent work suggests that two other critical factors involved in the perception of the Ebbinghaus illusion are the distance of the surrounding circles from the central circle and the completeness

of the annulus, which makes the illusion comparable in nature to the Delboeuf illusion. Regardless of relative size, if the surrounding circles are closer to the central circle, the central circle appears larger and if the surrounding circles are far away, the central circle appears smaller. While the distance variable appears to be an active factor in the perception of relative size, the size of the surrounding circles limits how close they can be to the central circle, resulting in many studies confounding the two variables.[1]
The Ebbinghaus illusion has played a crucial role in the debate over the existence of separate pathways in the brain for perception and action (for more details see Two Streams hypothesis).[2] It has been argued that the Ebbinghaus illusion distorts perception of size, but not action. A study by neuroscientist Melvyn A. Goodale showed that when a subject is required respond to a physical model of the illusion by grasping the central circle, the scaling of the grip aperture was unaffected by the perceived size distortion.[3] While other studies confirm that the insensitivity of grip scaling to size-contrast illusions like the Ebbinghaus illusion is real, other work[4] suggests that both action and perception are fooled by the illusion.
Neuroimaging research suggests that there is a strong inverse correlation between an individual's receptivity to the Ebbinghaus and similar illusions (such as the Ponzo illusion) and the highly variable size of the individual's primary visual cortex.[5] Developmental research suggests that the illusion is dependent on context-sensitivity. When testing children aged 10 and under and a sample of university students, the illusion was found more often to cause relative-size deception in adults, who have high context-sensitivity, than deception in young children, who possess low context-sensitivity.